1. Reports
  2. Daily FX Report
Non-independent Research

Daily FX Report

Read disclaimer

EUR / USD

 

The Euro remained on the defensive in early Europe on Thursday with the break below 1.1500 against the dollar on Wednesday continuing to undermine confidence.

The EU Commission revised its 2021 GDP growth forecasts higher to 5.0% from 4.3% previously with 2022 GDP growth projected at 4.3%. The 2021 CPI inflation forecast was revised higher to 2.4% before slowing to 2.2% next year and 1.4% in 2023.

The overall impact was limited, especially with expectations that the ECB will maintain a very accommodative policy stance over the medium term.

The dollar continued to gain underlying support from Wednesday’s much higher than expected CPI inflation forecast with expectations that the Federal Reserve would have to take a more aggressive monetary stance. There was speculation that the tapering of bond purchases would be accelerated and that there would be an earlier than expected increase in interest rates.

There was also speculation that the Fed and Administration would be happy to see a firm dollar to help cap near-term inflation pressures.

Overall trading rages narrowed with no further major data releases during the day and a partial US holiday. The Euro was unable to regain significant ground and settled around 1.1460 amid expectations that yield differentials will undermine the single currency.

The dollar held firm on Friday with the currency index at the highest level since July 2020 while the Euro traded close to 15-month lows just below 1.1450.

 

JPY

 

US Treasury futures were little changed on Thursday with the 10-year yield holding around 1.57%. The partial US holiday curbed activity and the dollar was held just below the 114.00 level at the New York open.

Following the much higher than expected inflation data, markets will monitor comments from US Federal Reserve officials closely in the short term. In particular, asset prices will be very sensitive to hints over the potential timetable for an increase in interest rates.

Any Administration hints on whether Powell will be nominated for a second term as Fed Chair will also be monitored closely in the short term ahead of an expected announcement later this month. The dollar would be at risk of selling f Powell is not nominated for a second term.

Asian equity markets were able to make headway on Friday with an easing of immediate concerns surrounding China’s real-estate sector, although there were still important longer-term reservations. Overall, the dollar secured a limited net advance to around 114.20 with the Euro edging higher to the 130.70 area.

 

GBP

 

Sterling lost ground following the raft of UK data releases with further concerns that the underlying recovery was fading, especially as the September GDP data was boosted by healthcare spending. A faltering recovery would make it more difficult for the Bank of England to justify higher interest rates.

The latest quarterly trade data also recorded a small decline in exports to the EU while imports increased with a trade deficit of close to £18.0bn from £16.1bn the previous quarter. The underlying trade performance will continue unsettled medium-term Sterling confidence, especially with underlying trade tensions also persisting.

Sterling dipped to fresh 2021 lows around 1.3365 against the dollar with the Euro making limited gains. The UK currency did recover some ground during the day with the increase in domestic yields providing an element of protection from further selling.

Markets will remain on alert for comments from Bank of England officials given speculation that there will be a rate increase next month.

Sterling settled below 1.3400 against the dollar with the Euro around 0.8565. Dollar strength continued to dominate on Friday with Sterling around 1.3365 against the US currency. The Euro was just below 0.8560 with markets still on alert for comments from Bank of England officials and Haskel is due to speak later in the day.

 

CHF

 

The Swiss franc held firm in early Europe on Thursday, but gradually lost ground during the day. Although there was speculation that the National Bank could eventually tolerate franc gains, there was still a reluctance to take on the central bank in the short term given the threat of intervention, especially as the central bank has stepped-up franc sales during the past two weeks. Global inflation concerns are still likely to provide net support for the Swiss currency.

The Euro settled just above the 1.0550 level while the dollar peaked at 0.9225 before fading. The franc was marginally lower on Friday with the dollar around 0.9220.

 

Technical Levels

Contents

Disclaimer

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

This report is not subject to any prohibition on dealing ahead of the dissemination of investment research. Accordingly, the information may have been acted upon by us for our own purposes and has not been procured for the exclusive benefit of customers. Sucden Financial believes that the information contained within this report is already in the public domain. Private customers should not invest in these products unless they are satisfied that the products are suitable for them and they have sought professional advice. Please read our full risk warnings and disclaimers.

Sign-up to get the latest Non-independent research

We will email you each time a new report has been published.

You might also be interested in...

Daily Report Base Metals

Daily market commentary on LME aluminium, copper, lead, nickel, tin and zinc.

Daily Report Softs Technical Charts

Technical analysis and charts for the key sugar, cocoa and coffee contracts.

Weekly Report FX Options

Commentary and analysis covering OTC currency option pricing, volatility and positioning.

FX Monthly Report November 2021

Monthly commentary covering the FX markets, providing insights on recent developments on select currency pairs, this month we focus on Turkey. Inflation continues to rise and the Central Bank cut rates, as the Fed starts to become hawkish. The report includes a macroeconomic overview as well as desk comments and technical analysis on key currency pairs.

Quarterly Metals Report – Q4 2021

The global macro picture is starting to present some downside risks in the near term as China's economy is set to slow further and supply-chain bottlenecks continue to cap growth. New orders and new export orders in China are contractionary, and we expect demand in Q4. Order backlogs and lead times for products will continue in Q4, limiting growth, and real consumption is weaker than it looks. Higher costs from shipping, raw materials and energy will take their toll on the consumer, and we expect end-user demand to suffer. The final piece of the jigsaw is the reduction in stimulus from central banks and how that will impact financial markets, bond yields, and the dollar has rallied while stocks corrected, but what will this trend continue?